The Relative Performance

Relative performance is one of the most important Indicator for a market technician. Why? There are a few reasons. First. It is easy to calculate. It is a simple ratio between two assets e.g. Dow 30 vs. Gold. (Illustrated below). Second, the interpretation of the relative performance ratio line is easy. If the ratio line is falling DOW 30 is underperforming Gold and vice versa. Third, just like any other market variable even the relative performance is open to predictive interpretation and seasonality. There can be overbought levels, oversold levels, reversals and continued trends.
We analyzed a few global indices, commodities, currencies vs. Gold. What did we observe? We observed that starting 2009 DOW 30 is struggling to outperform Gold, but from Sep 2011 DOW 30 has finally started to outperform Gold. If DOW 30 is outperforming Gold since 2011, there is no crisis or panic in American equities from the respective period. This again challenges the conventional belief that markets are on a weak footing. Because rising Gold is a benchmark for increasing fear and uncertainty. Above this, all the other global equity Indices we studied suggested that the multi week trend is still positive for equities vs. Gold. Even currencies suggest that there is a high probability that Gold underperformance would continue. This confirms our bullish case for global equity.
Unlike the shorter term perspective, the longer term multi year perspective is different. Gold has erased a lot of wealth since 1990’s. For example currently in 2012, the Indian Sensex


Dr. Ionut Nistor is the co-author of Performance Cycles paper published in Kyoto Economics Journal in March 2009. Ionut is a professor of Corporate Finance at Babes -Bolyai University and a post doctorate fellow at the Kobe University in Japan. He is fluent in Japanese, Romanian and English.
The Bric Model from a Japanese Perspective
Ionut Nistor – Econohistory